In 2002, the Internal Revenue Service (IRS) adopted a program – the Employee Plans Compliance Resolution System (EPCRS) – to enable sponsors of employee benefit pension plans (primarily tax-qualified plans) to self-identify and correct various types of operational, document and other errors. EPCRS offers three programs for correcting plan errors, each available under specific circumstances: (i) Self-Correction Program (SCP), (ii) Voluntary Correction Program (VCP) through a submission to IRS, and (iii) Audit Closing Agreement Program (Audit CAP). Since its inception the IRS has updated EPCRS from time to time. On September 28, 2018, with the release of Revenue Procedure 2018-52, the IRS modified and superseded the most recent prior consolidated iteration of EPCRS, which was set forth in Revenue Procedure 2016-51.
The new EPCRS is generally effective January 1, 2019. The updates therein are limited, but the most important modification is to establish new online VCP submission procedures. This means that beginning on April 1, 2019, applicants will no longer be permitted to file paper VCP submissions. Plan sponsors will be required to use the www.pay.gov website to file VCP submissions and pay applicable user fees. Under a transition rule, between January 1, 2019 and March 31, 2019, applicants will have the option of either mailing under the procedures set forth in Rev. Proc. 2016-51, or using the www.pay.gov website. While the same type of documents that are submitted under the current program will continue to be required, there are procedural differences under the new electronic filing procedure:
- An applicant must use the www.pay.gov website to create a pay.gov account. This account will be used when filing a VCP submission and the appropriate user fees.
- After a pay.gov account has been established, the applicant must complete Form 8950 using the www.pay.gov website.
- Documents relating to the VCP submission, including a description of the failures, must be converted into a single PDF document and then uploaded to the www.pay.gov website. However, there is a 15 MB size limit and there are special instructions for VCP submissions in excess of that limit, which will likely apply to many submissions.
- New procedures are established relating to the payment of user fees, including the generation of a payment confirmation.
- Specific instructions are provided on how to designate an authorized representative using form 2848.
We note that the new EPCRS does not address concerns that VCP user fees, which were recently increased effective January 2, 2018, are a barrier to small employers from taking advantage of the program, who may choose to utilize the SCP component of EPCRS instead.
Other modifications were made to reflect changes in IRS programs, such as the Pre-Approved Plan Program for Qualified Plans and Pre-Approved 403(b) plans. A number of technical changes and clarifications were also made.
While there are no substantive changes to the prior program, the IRS indicated it is in the process of developing changes with respect to the correction of overpayments rules, and is reviewing comments on the manner in which SCP might be expanded.